More insurance questions answered

Russ Dubisky, executive director of the South Carolina News Service, continues to answer questions to familiarize our readers with updated South Carolina information.

Q: The Legislature adjourned a couple of months ago. Is there any insurance-related legislation that our citizens should be aware of?

A: One bill that was signed into law from this past session is, H3409, which provides protection to homeowners against the practices of an abusive minority of roofing contractors.

This legislation was introduced as a number of consumers in Georgia and the Carolinas were defrauded after signing contracts with unscrupulous roofing contractors to repair hail-damaged roofs.

The legislation includes some consumer protections. For example, it provides that a homeowner who signs a contract for roof repair that he/she intends to be paid from the proceeds of a property casualty insurance policy can cancel the roofing contract within five business days after receiving notice from the insurer that any part of the claim or contract is not a covered loss under the insurance policy, for example if there was no storm damage to the roof. Except for such emergency services, the contractor may not require any payments from the homeowner until the five-day cancellation period has expired.

Generally, we provide the following advice to homeowners to help them avoid fraud in the first place: if you suspect your roof has been damaged by hail, talk to your insurance agent or company and ask for advice on how to proceed in getting repairs made.

Take caution in selecting a roofing contractor. Investigate the track record of any roofer or contractor you consider hiring. Look for companies with a good reputation in your community. Call your Better Business Bureau for help, get references and do not give anyone a deposit until you are sure they are reputable.

Homeowners shouldn’t be pressured into signing a contract with a particular company.

Beware of a company that puts emphasis on how the homeowner can get a new roof paid for by the insurance company.

Keep receipts for temporary repairs and get estimates for the work.

As legislators return to Columbia in January, we could see some renewed interest in coastal property insurance issues.

Some coastal consumers have been actively pushing for insurance reforms that would require rate decreases. Proponents cite the relative infrequency of hurricanes, and conclude that rates must not be reflective of the risk.

“Risk” cannot simply be reduced to the measure of how often a specific event will occur. In fact, hurricanes are, thank goodness, infrequent events. However, when they do hit, they often cause damage that totals decades’ worth of premiums (that’s premium, not profit).

For example, Hurricane Hugo would cause an estimated $10-$11 billion if it hit today. The HO insurance industry only collects roughly $1.2 billion each year in premium. The premiums collected pay for business expenses, employee salaries, and other claims that are more common like fire, water damage, hail, and liability.

A portion of the premium is reserved for catastrophic events like hurricanes, and used to purchase reinsurance. The simple point is “risk” must be evaluated with a combination of frequency and severity.

The second point I would make is that insurance rates are based in part on the cost of repairing and rebuilding structures. The average claim cost for homeowners in S.C. has increased 155 percent over the last 15 years. As the cost to repair or rebuild homes increases, it is reasonable to expect that your insurance might also increase.

In a competitive environment like South Carolina, companies offer those customers that are perceived to have the lowest risk, the best rates. If companies were forced to artificially suppress rates in coastal areas, they would lose the flexibility they need to offer better rates to those customers who have less exposure to loss.

The National Association of Insurance Commissioners reports that South Carolina’s annual average homeowners rate is fourth lowest among southeastern and gulf states.

Q: Are there any other issues that we should be made aware of?

A: As South Carolina college students head back to class this time of year, we look to remind renters the importance of having renters insurance.

Students and parents should take some time to make sure they have the right insurance coverage in place before moving in to their apartment or dorm room. Theft is the number one crime on college campuses in the U.S. , and if something happens to that expensive computer or electronic equipment, many students may be astounded to learn they don’t have adequate insurance coverage.

While students living in dormitories probably have some coverage under their parents’ homeowner or renter insurance policies, it may not be enough. Many homeowners’ insurance policies may limit the amount of insurance for off-premises belongings to 10 percent of the total amount of coverage for personal possessions.

If you’re renting an apartment off campus, your belongings are not protected unless you purchase renters insurance. These policies are relatively inexpensive, costing as little as $200 a year, but fewer than half of all apartment dwellers have one.

Renters insurance will protect your computer, clothing, jewelry, camera, television and other valuables you can’t afford to replace from losses due to theft, fire or smoke, lightning, vandalism, explosion, windstorm, hail and water damage from plumbing.

Renters insurance also provides liability protection in case someone is injured at your home, and pays legal defense costs if you are taken to court.

If your apartment is damaged by a fire or other covered event, most policies will help pay your additional living expenses if you must move out while repairs are made.

Your insurance provider can help answer your specific questions, and find the renters policy that best fits your individual needs.

Q: Where can more information about these and other insurance-related topics be located?

A: Listeners are encouraged to visit our website at SCinsurance.net. Also, your local insurance agent, broker, or company is always a good resource for individuals who have questions about their own insurance.